The Shale Revolution & The Current Oil Price Collapse



9 Comments

  • John

    Art

    In remembrance of Yogi Bera, “it looks like Deja vu all over again”.

    Has your opinion on the shale gas plays changed? I only ask because I often speculate if Cabot has used its prolific Marcellus production to “in effect” subsidize its Eagle Ford program. Granted it’s not a direct subsidy, but why else would you overproduce to such an extent? Another Marcellus producer,I am aware of was getting $.25/mcf last June. I don’t know what it is realizing at present but I don’t think a strategy of “capturing market share” in the NA market is going to benefit anyone.

    Again, I don’t pretend to know just what Cabot’s corporate strategy is but up until a few years ago, it had a pretty balanced Exploration and production program with assets in the Rocky Mtns, Permian, Gulf Coast, Louisiana, and Appalachians. Today is only Marcellus and Eagle Ford.

    • Arthur Berman

      John,

      Thanks for your comments and question. No, I have not changed my view of shale gas plays. Some of Cabot’s Marcellus production is commercial in the core area with their hedge positions, although very marginally so. You must look at hedges and not just well head pricing.

      I doubt that Cabot is subsidizing their Eagle Ford play with Marcellus production. They are probably trying to continue gas production growth as part of their stock expectation. Cabot has followed the herd away from a balanced portfolio because they do not believe that there are sufficient reserves in conventional plays to satisfy their corporate needs and I understand that view.

      All the best,

      Art

  • Daniel Santiago Páez

    Good morning Mr. Berman, congratulations for your interesting outlook. I am currently working on an oil paper about the Challenges of Shales in Colombia, I would like to know it was possible to have an interview or your opinion about some topics.
    Thanks,
    Sincerely
    Daniel Páez

  • Nice work Art.
    If we focus on U.S. gasoline consumption at 10 Mbd (equal to ALL China’s oil consumption, or ALL of EU’s oil consumption) as the “elephant in the room” everything makes more sense.
    The world’s fuel gage is moving toward”E” at 32 Bby. The party WILL END in 20 years at this rate, even if consumers could afford non-conventional oil and we ignore increasing EROEI. American gasoline consumers are broke and cannot continue to afford higher priced fuel as we move out onto Hubbert’s Cliff.
    Please see my updated website. I placed a small ad (at great expense) in USA Today to go public with these facts. No response!

    • Arthur Berman

      John,

      I don’t think the argument that American consumers are too broke to buy gasoline is consistent with recent Vehicle Miles Traveled data. I agree with your general thesis but I believe that people make economic choices and will choose to buy gasoline at today’s low prices.

      All the best,

      Art

  • Art,
    Any recent upsurge in vehicle miles driven serves to proves my hypothesis, as we rush to burn through our most important finite energy source. Future be damned!
    The lower cost of oil just reflects the the past ten-year plateau and sag in American gasoline consumption, because of higher prices, increasing American debt, less miles driven, and more efficient cars.
    Always focus on the FACT that U.S. gasoline consumption alone is the No.1 “driver” of world oil demand. We can not expect to consume oil at 22 barrels per person per year (10 bpppy just for gasoline) while the rest of the world including China uses only 3 bpppy.
    All one needs to do is drive onto the highway anywhere in urban America and join the traffic. It’s insane. Most every mile driven, including mine, is a gross waste of energy.
    The only reason I keep at this lonely though process is that this route points out the only way that we could extend our lifestyle more than another decade or so…. Equitable RATIONING of gasoline would put a whole new slant on our economy and renew the emphasis on alternatives to oil, while we still have oil and wealth left to make a transition.

    Thanks for your dialogue and forum. This subject of peak oil based on U.S. gasoline consumption bears directly on our future ability to feed ourselves after we quickly burn up the last cheap oil. Forget 18 wheelers, heating oil and air travel without oil.

    As soon as “production destruction” catches up with “demand destruction”…maybe next year, the price will spike back up, consumption will continue to wane, and we will be falling off “Hubbert’s Cliff”. It will then be all “Obama’s fault” and a new President will promise to solve the problem with the KXL pipeline.
    Maybe next year more people will understand the FACTS and educate the public and media.

    It would be great to include more colleagues in this thought process and stop kidding ourselves that electric cars, electric tractors(I have three!) and solar airplanes will be the answer.

    John

  • Correction on N0.6: Line 11 should be thought process, not though process.

    Sorry about that.

    John

  • […] about global economic weakness show up in commodity prices and asset markets across the board. Art Berman notes the striking visual similarity of graphs for prices of different […]

  • […] We have to be aware of what’s going on offshore and how it affects us. Check out Energy specialist Art Berman’s presentation The Shale Revolution & The Current Oil Price Collapse. […]

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